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New Year’s exodus from Credit Suisse?

Will Credit Suisse investment bankers really hang around to see whether the bank’s new bonus scheme is a better deal than it looks? If they decide to leave, Barclays Capital could be the biggest beneficiary.

The Wall Street Journal’s Deal blog points out that in the current market getting paid in distressed debt is no bad thing, particularly as CS has generously marked the debt behind its ‘Partner Asset Facility’ down to 65 cents in the dollar.

Nevertheless, the Financial Times said that investment bankers at Credit Suisse who had no hand in the creation of the noxious securities behind PAF might want to go elsewhere.

Headhunters say there’s not much sign of this yet. “There’s nowhere to go,” says one M&A headhunter at a leading firm. “We haven’t had any calls from Credit Suisse at all, which just goes to show how bad it.”

“Credit Suisse bankers will wait for their bonus numbers next year and you might see movement after that,” says another. “But you’d have to be pretty peeved to leave in this environment – recent lateral hires are usually among the first to be cut and people know that.”

If CS bankers do decide to quit, boutiques and Barclays Capital are likely to be benefit. Small houses like Fenchurch Advisory Partners are said to be hiring, and BarCap is understood to be making selective M&A hires after poaching a team from ABN AMRO in May.

Go now, or stay forever

Credit Suisse bankers who don’t leave in the first year or two might find themselves stuck. Both the clawback provision, which allows CS to recoup the 2.5% interest paid on assets underpinning bonuses for up to two years if an employee resigns, and the fact that rival institutions are unlikely to buyout assets in the PAF, will act as a disincentive to leave.

The Wall Street Journal’s article questioned the legality of the clawbacks, claiming that they amount to “an onerous form of restrictive covenant.”

One leading UK employment lawyer (who asked not be named in anticipation of representing CS bankers on this issue), says this is unlikely. “At the end of the day, clawbacks are probably lawful. It’s just like an employer who’s sponsored you for an MBA saying that you have to repay the fees if you leave within a specified time.”

Comments (9)

  1. Which banks use clawbacks? I heard CSFB , GS, BNPP use them, who else?

  2. Credit Suisse types are hardly seen as the Top movers in their fields, add that to the lack of roles out in the marketplace and one doubts that there will be any real movement either in thw short or medium term. Also as mentioned the Bonus idea looks a winner with the huge markdown put in place.

    Nottemptedtojump Reply
  3. MBA: JPM also

  4. Exodus may be a big word in these times of tough employment market! Even if many of them try to leave, very few will find a seat somewhere else!

  5. What is the average clawback period for associates ? E.g. how long does one need to stay after you receive your annual bonus in order to keep it for the full 100% without any obligations?

  6. MBA , Bonuses !!!!!!! as an associate ! you will be locky to get a job , I woukdnt bother thinking of bonuses at this stage in yiour career

    longinthetooth Reply
  7. I am not thinking about bonuses, I am just thinking about the future, I accepted a small boutique job(< 10 people in total), in due time when market recovers in 2011 I would like to move to BB and make a name for myself.

    I want to know what is common standard practise for the lenght of the clawback period and what is the common length for a non-competing clause (not to do the same job at a competitior)

    Some say its 6months for both.. isn't it a bit long especially on the associate level


  8. Non – compete – 6-12 months commonplace.

    Bonus clawback:

    if its a standard, year end discretionary bonus – typically no clawback.
    if its a standard, year end guaranteed bonus – again typically no clawback
    if its a bonus advance/sign-on, typically clawed back up until the end of the bonus year in which it is granted.

  9. Thanks MIke

    I heard GS, BNPP, CSFB now use clawback periods for year end standard bonusesses varying from 3-6m to 1 year, why are they doing this? I mean I understood from headhunters, typically in a good market a new employer will buy you your bonus.

    Second, what does the non-compete entails? Is there a way to waive it? I mean 1-2 month notice + 6-12months is out of job for 1 year before a move without income ?Isn’t that crazy especially on the associate level?

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